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Abstract
This study proposes to use a structural VAR model, using annual percentage change series on
U.S. gasoline prices, agricultural productivity, real GDP, agricultural exports, and agricultural
commodity prices, to assess the impact of energy shocks on U.S. agricultural productivity growth
and food price variations. These data span the period 1948 to 2009. Study results indicate that in
the short-run (1 year) an energy shock and a productivity shock each accounts equally for 10
percent of the food price volatility. However, the impact from an energy shock overweighs the
contribution of a productivity shock in the intermediate term (3 years), where an energy shock’s
contribution increases to twice as much as a productivity shock’s contribution (16 percent
compared to 8 percent). Besides the specific food market shock, the global demand shock in U.S.
agricultural exports is the major factor in explaining the volatility in U.S. food prices, and
accounts for one-third of the food price fluctuations.